SURFACE SHIPS

Navy Needs to

Revise Its 

Decommissioning 

Policy to

Improve Future 

Decision Making

Report to Congressional Committees

June 2014

GAO-14-412

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-14-412, a report to 

congressional committees

June 2014

SURFACE SHIPS

Navy Needs to Revise Its Decommissioning Policy to 

Improve Future Decision Making 

Why GAO Did This Study

In today’s fiscally constrained 

environment, the Navy must balance 

short- and long-term costs and risks. In 

February 2012, although it had

concerns that its battle force was 

below the number of ships needed, the 

Navy announced plans to 

decommission nine ships. 

Congress mandated that GAO review 

the Navy’s methodology and analysis 

that supported its decommissioning 

decision. This report evaluates (1) the 

extent to which the Navy followed its 

policy when deciding to decommission 

nine ships before the end of their 

service lives, and (2) the extent to 

which the Navy’s policy incorporates 

federal standards for internal control. 

To evaluate these issues, GAO 

obtained evidence and interviewed 

officials about the process the Navy 

used to develop its decommissioning 

decision. GAO also analyzed the 

Navy’s decommissioning policy, and 

compared its requirements to federal 

standards for internal control. 

What GAO Recommends

GAO recommends that the Navy follow 

its policy to document its early 

decommissioning decisions and also 

update its policy to incorporate key 

federal standards for internal control—

including engaging external 

stakeholders and evaluating 

performance measures, such as risks.

DOD partially agreed with both 

recommendations. DOD agreed that it 

should follow its policy but questioned 

the importance of updating the policy 

to incorporate certain internal control 

elements. GAO believes that these 

recommendations remain valid as 

discussed in the report.

What GAO Found

The Navy did not follow its policy when deciding in 2012 to decommission seven 

cruisers and two dock-landing ships well prior to the end of their expected service 

lives. When ships are decommissioned early, the Navy’s policy requires a 

decision memorandum to address why it is in the best interest of the Navy to 

decommission the ships and mitigation strategies for any resulting capability 

gaps. GAO found that the Navy did not prepare the required decision 

memorandum. According to Navy officials, they did discuss budget and cost 

issues, including maintenance and modernization costs, but they did not prepare 

the decision memorandum because they were under time pressure to identify 

budget savings. Congress did not support the Navy’s decision and provided 

funds to maintain, operate, and sustain the nine ships in the fleet, and the Navy 

has since reversed its decision to decommission the ships. However, it now 

plans to take these ships and five others out of their normal deployment cycles, 

modernize them, and then place them back into service at a later time. The figure 

below shows the Navy’s recent proposals and subsequent congressional actions.

Key Navy and Congressional Actions for Seven Cruisers and Two Dock-Landing 

Ships

The Navy’s decommissioning policy does not incorporate key federal standards 

for internal control such as engaging external stakeholders, comparing actual 

performance to planned or expected results, and evaluating performance 

measures to achieve goals. While the policy requires communication within the 

Department of the Navy, it does not require the Navy to engage with external 

stakeholders (e.g., Congress). In addition, the policy does not require the Navy to 

compare differences between actual and expected performance and then use the 

results to adjust future decisions or plans. Further, the Navy’s decommissioning 

policy does not require officials to specifically evaluate performance measures, 

such as risks, readiness, or maintenance costs, when making an early 

decommissioning decision. Moreover, the Navy’s policy requires that officials 

address some elements of risk in their decision memorandum but does not 

specifically require that they evaluate risks associated with shortfalls in the 

number of ships. In this case, the Navy recommended decommissioning large 

surface combatants and amphibious ships when it was simultaneously reporting 

shortfalls in those same ship types to support its shipbuilding plans. Specific 

policy direction requiring engagement with external stakeholders and evaluation 

of key performance measures can help ensure that the Navy successfully 

articulates and justifies any future decisions to decommission ships prior to 

reaching their expected service lives. View GAO-14-412. For more information, 

contact John Pendleton at (404) 679-1816 or 

pendletonj@gao.gov.
Page i GAO-14-412 Navy Surface Ships

Letter 1

Background 3

Under Budget Pressures, the Navy Did Not Follow Its Policy 

before Deciding to Decommission Nine Ships 7

The Navy’s Early Decommissioning Policy Does Not Incorporate 

Key Aspects of Federal Standards for Internal Control 10

Conclusions 15

Recommendations for Executive Action 15

Agency Comments and Our Evaluation 16

Appendix I Scope and Methodology 20

Appendix II Comments from the Department of Defense 23

Appendix III GAO Contact and Staff Acknowledgments 26

Table

Table 1: Navy Surface Combatant and Amphibious Ships as of 

March 2014 5

Figures

Figure 1: Images of a Navy Cruiser and Dock-Landing Ship 4

Figure 2: Key Navy and Congressional Actions for Seven Cruisers 

and Two Dock-Landing Ships 7

Figure 3: Time Frames for Developing the Alternate Program 

Objective Memorandum (POM) 2013 9

Figure 4: Total Number of Navy Cruisers by Year Based on 

Navy’s 2012 Decommissioning Proposal 14

Figure 5: Partial Organization of the Office of the Chief of Naval 

Operations 22

Contents
Page ii GAO-14-412 Navy Surface Ships

Abbreviations

DOD Department of Defense

OSD Office of the Secretary of Defense

POM Program Objective Memorandum

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United States. The published product may be reproduced and distributed in its entirety 

without further permission from GAO. However, because this work may contain 

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Page 1 GAO-14-412 Navy Surface Ships

441 G St. N.W.

Washington, DC 20548

June 11, 2014

Congressional Committees

In today’s fiscally constrained environment, the high cost of Navy ships 

and the declining size of the Navy’s fleet have complicated the Navy’s 

attempts to balance its near-term support of the geographic combatant 

commanders with its preparations for uncertain future requirements. 

Within its battle force, the Navy currently has 84 large surface 

combatants—22 cruisers and 62 destroyers–and 31 amphibious ships, 

including 12 dock-landing ships. According to the Navy’s long-term 

shipbuilding plan, the battle force is below the numbers of large surface 

combatants and amphibious ships needed to support the Defense 

Strategic Guidance.1 However, in the President’s fiscal year 2013 budget 

proposal, which was submitted to Congress in February 2012, the Navy 

decided to further reduce the size of its battle force by decommissioning 

seven Ticonderoga-class cruisers (large surface combatants) and 2 

Whidbey Island–class dock-landing ships (amphibious ships). The Navy 

had identified all nine ships, which had expected service lives of 35 years 

(cruisers) or 40 years (dock-landing ships), to be decommissioned well 

before the end of their expected service lives. In the National Defense 

Authorization Act for Fiscal Year 2013, however, Congress prohibited the 

Navy from obligating or expending funds to retire or inactivate 

Ticonderoga-class cruisers or dock-landing ships.2 In the Consolidated 

and Further Continuing Appropriations Act of 2013, Congress 

appropriated funding to operate and maintain the ships through 

September 2014.3

 1

Department of Defense, Sustaining U.S. Global Leadership: Priorities for 21st Century 

Defense (Washington, D.C.: Jan. 5, 2012). In 2012, the Navy lowered its requirements for 

large surface combatants by 6 ships—from 94 to 88 ships—due to its plans to move 4 

destroyers to Rota, Spain, as part of the “Forward Deployed Naval Force.” To support 

Marine Corps requirements, the Navy requires 33 amphibious ships that are available 90 

percent of the time. 

In March 2014, the Navy revised its decision. It now 

has decided to take 14 ships—including the 9 ships identified in the 

February 2012 decision—out of their normal deployment rotations and to 

place them in long-term phased modernization to preserve the lives of the 

2

Pub. L. No. 112-239, § 354 (2012).

3

Pub. L. No. 113-6, Div. C, Title VIII, § 8103 (2013). 
Page 2 GAO-14-412 Navy Surface Ships

ships.4

The Fiscal Year 2013 Consolidated Appropriations Act conference report 

mandated that GAO review the Navy’s methodology and analysis 

regarding its decision to decommission the seven cruisers and two docklanding ships.

According to the Navy, the ships would be modernized at a later 

time and placed back into service.

5

To evaluate the extent to which the Navy followed its policy when it 

decided to decommission nine ships before the end of their service lives, 

we interviewed Navy headquarters and fleet officials and obtained 

evidence regarding the process the Navy followed. To the extent that 

documentation was available, we analyzed this documentary evidence 

and used it to either corroborate the testimonial evidence we had 

received or to serve as a basis for follow-up discussions or 

correspondence where we sought to resolve conflicting evidence. This 

documentation included e-mails, internal briefing slides, as well as longrange shipbuilding plans, and the minutes from Ship Inactivation Decision 

conferences that were held by the Navy before and after the Navy 

decided to decommission the nine ships. In addition, we obtained and 

analyzed applicable criteria, specifically the Navy’s general policy for the 

inactivation, retirement, and disposition of naval vessels.

This report evaluates (1) the extent to which the Navy 

followed its policy when it decided to decommission nine ships before the 

end of their service lives, and (2) the extent to which the Navy’s policy 

incorporates federal standards for internal control.

To evaluate the extent to which the Navy’s policy incorporates federal 

standards for internal control, we analyzed the Navy’s decommissioning 

policy and standards for internal control in the federal government.6

 4

According to the Navy, its 11 newest cruisers (CG 63 though CG 73) will be removed 

from active service in 2015, and, after undergoing modernization, their service lives will be 

extended by 5 years and they will be reactivated on a one-for-one basis as the Navy’s 11 

oldest cruisers (CG 52 through CG 62) reach the end of their expected service lives. 

Three dock-landing ships will also undergo a phased modernization program, beginning in 

2016, but only one dock-landing ship will be removed from active service at a time. 

We 

5

The GAO mandate appears in an explanatory statement accompanying the 2013 

Consolidated Appropriations Act, which was enacted on March 26, 2013. Section 4 of the 

act provides that the statement shall have the same effect as if it were a joint explanatory 

statement of a committee of conference. 

6

GAO, Standards for Internal Control in the Federal Government, GAO/AIMD-00-21.3.1

(Washington, D.C.: November 1999).
Page 3 GAO-14-412 Navy Surface Ships

then compared the federal standards for internal control criteria to the 

Navy’s decommissioning policy, as well as the process the Navy relied 

upon to arrive at its decommissioning decision. For both objectives, we 

interviewed officials from the Office of the Secretary of Defense (OSD), 

Cost Assessment and Program Evaluation directorate; Office of the Chief 

of Naval Operations: Integration of Capabilities and Resources, Surface 

Warfare, Expeditionary Warfare, and Warfare Integration; and Naval Sea 

Systems Command. The Navy’s decision to take the 14 ships out of their 

normal deployment rotations and place them in long-term phased 

modernization to preserve the lives of the ships was outside the scope of 

this review and we did not evaluate the documentation that may have 

been prepared to support that decision.

We conducted this performance audit from May 2013 to June 2014 in 

accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives. We discuss our scope and 

methodology in more detail in appendix I.

The National Military Strategy7 is the Chairman of Joint Chiefs of Staff’s 

plan to achieve military objectives in the near term, while maintaining a 

force capable of meeting long-term challenges. This strategy implements 

the National Defense Strategy, which outlines the Secretary of Defense’s 

approach to implementing the President’s National Security Strategy. 

Further, the Navy periodically conducts a force-structure assessment that 

justifies the specific number of ships required by the Navy, based on the 

requirements of the National Defense Strategy and the National Military 

Strategy.

 7

Chairman of the Joint Chiefs of Staff, The National Military Strategy of the United States 

of America, 2011: Redefining America’s Military Leadership (Feb. 8, 2011).

Background

Military Strategy
Page 4 GAO-14-412 Navy Surface Ships

The Navy’s battle force includes aircraft carriers, surface combatants, 

submarines, amphibious ships, mine warfare ships, combat logistics 

ships, and fleet support ships. Surface combatants and amphibious ships 

can be further divided into “large” and “small” ships. Cruisers and 

destroyers make up the Navy’s large surface combatants and they 

support every core capability in the Navy’s maritime strategy. Small 

surface combatants support more-limited capabilities in the maritime 

strategy. Likewise, amphibious ships are grouped into large-deck 

amphibious assault ships and smaller amphibious transport dock or docklanding ships. Our review is focused on Ticonderoga (CG 47) class 

cruisers and Whidbey Island (LSD 41) class dock-landing ships. 

Examples of these types of ships are shown in figure 1.

Figure 1: Images of a Navy Cruiser and Dock-Landing Ship

Table 1 shows the numbers, expected service lives, and average ages of 

the active ships in Navy’s fleet of large surface combatant and 

amphibious ships as of March 2014. It shows that, on average, the Navy’s 

cruisers were 24 years old and had 11 years of expected service life

remaining in 2014, and the LSD 41 class dock-landing ships had, on 

average, 15 years of expected service life remaining.

The Navy’s Battle Force
Page 5 GAO-14-412 Navy Surface Ships

Table 1: Navy Surface Combatant and Amphibious Ships as of March 2014 

Ship type (class) Number of ships 

Expected service life 

(years)

Average age

(years)

Large surface combatants 84 35-40 16

Cruisers

(CG 47 class)

22 35 24

Destroyers

(DDG 51 class)

62 35-40 13

Amphibious assault ships 31 35-40 17

Amphibious assault

(LHA 1 class)

1 35 34

Amphibious assault

(LHD 1 class)

8 40 17

Amphibious transport dock

(LPD 4 class)

1 35 45

Amphibious transport dock

(LPD 17 class)

9 40 4

Dock-landing

(LSD 41 class)

8 40 25

Dock-landing

(LSD 49 class)

4 40 18

Source: Navy.

More than halfway through the Navy’s normal budget cycle, in August 

2011, the Office of the Secretary of Defense (OSD) directed the Navy to 

plan for the budget reductions that were included in the Budget Control 

Act of 2011.8

 8

Pub. L. No. 112-25, 125 Stat. 240 (Aug. 2, 2011). We have previously reported that the 

fiscal year 2013 sequestration was triggered by the Budget Control Act of 2011, which 

amended the Balanced Budget and Emergency Deficit Control Act of 1985. The latter act 

established sequestration to enforce discretionary spending limits and control the deficit. 

See GAO, 2013 Sequestration: Agencies Reduced Some Services and Investments, 

While Taking Certain Actions to Mitigate Effects, 

In accordance with OSD’s direction, the Navy planned to 

reduce the original 2013 budget proposal that it was in the process of 

preparing by nearly $60 billion over 5 years. In its adjusted proposal, the 

Navy terminated or reduced funding in areas deemed to be manageable 

risks. About 10 percent of the budget reduction came from force-structure 

GAO-14-244 (Washington, D.C.: Mar. 6,

2014).

Planning and Budgeting
Page 6 GAO-14-412 Navy Surface Ships

reductions. Specifically, the Navy decided to decommission the cruisers 

USS Cowpens (CG 63), USS Gettysburg (CG 64), USS Chosin (CG 65), 

USS Hue City (CG 66), USS Anzio (CG 68), USS Vicksburg (CG 69), 

USS Port Royal (CG 73); and the dock-landing ships USS Whidbey

Island (LSD 41)and USS Tortuga (LSD 46). In a series of legislative 

actions, Congress expressed its concern over the Navy’s decision to 

decommission nine ships early.9 For example, in the 2013 appropriations 

act, Congress provided $2.4 billion for a Ship Modernization, Operation 

and Sustainment Fund for the seven cruisers and two dock-landing ships 

through fiscal year 2014. In the 2014 Appropriations Act, Congress 

provided funds for these ships through fiscal year 2021. However, 

according to Navy officials, the Navy did not fully utilize this fund and 

continued with plans to decommission the nine ships.10

Figure 2 summarizes key Navy and congressional actions related to 

seven cruisers and two dock-landing ships from 2012 to 2014.

In March 2014, in 

conjunction with its fiscal year 2015 budget proposal, Navy officials made 

a new decision to move 14 ships into long-term phased modernization. 

The decision included the nine ships that the Navy had been planning to 

decommission early to help address budget concerns, as well as four 

additional cruisers (USS Shiloh (CG 67), USS Lake Erie (CG 70), USS 

Cape St. George (CG 71), and USS Vella Gulf (CG 72)) and one 

additional dock-landing ship (USS Germantown(LSD 42)).

 9

These legislative actions include the national defense authorization acts for fiscal years 

2013 and 2014 and the fiscal years 2013 and 2014 appropriations acts.

10Navy officials said they made limited use of this fund to operate and sustain the ships 

but they did not use the fund for any ship modernizations. They said that it would not 

make sense to use the fund to modernize the ships because law and policy bar major 

modernizations for ships nearing decommissioning. Specifically, law and policy restrict the 

Secretary of a military department from performing major modernizations on any weapon 

platforms, including ships that would be completed within 5 years of being retired, with 

some exceptions. Furthermore, Navy officials stated that the funds were not sufficient to 

modernize all nine ships, and modernizations can take more than 2 years to plan and 

complete.
Page 7 GAO-14-412 Navy Surface Ships

Figure 2: Key Navy and Congressional Actions for Seven Cruisers and Two Dock-Landing Ships

The Navy did not follow its policy when deciding in February 2012 to 

decommission seven cruisers and two dock-landing ships prior to 

reaching their expected service lives in order to achieve reductions in the 

department’s budget. Since 2009, the Navy has had a general policy,11

• why it is in the best interest of the Navy to retire the vessel prior to the 

end of its estimated service life;

OPNAV Instruction 4770.5G, to, among other things, guide 

decommissioning decisions. When the Navy decommissions a ship prior 

to the end of its estimated service life, the policy does not require any 

specific analysis or reports, but it does require a decision memorandum, 

which must at a minimum, address

• any capability gaps that will occur upon decommissioning of the ship, 

including the duration of the capability gap; and

• recommended strategies to mitigate any gaps in capability.

The Navy’s policy states this decision memorandum must be prepared by 

the Office of the Chief of Naval Operations, Warfare Integration 

directorate (N9I)12

 11Department of the Navy, OPNAVINST 4770.5G, General Policy for the Inactivation, 

Retirement, and Disposition of U.S. Naval Vessels (Feb. 6, 2009).

and approved by the Chief of Naval Operations, 

Integration of Capabilities and Resources directorate (N8). However, 

officials within the Chief of Naval Operations offices did not adhere to the 

12The Navy’s decommissioning policy designates N8F as the directorate within the Office 

of the Chief of Naval Operations responsible for preparing the decision memorandum. 

However, after the policy was released, the Navy realigned its organizational structure and 

N8F became N9I (Office of the Chief of Naval Operations, Warfare Integration 

directorate), according to an N9I official. For the purposes of this report, we refer to N8F 

as N9I.

Under Budget 

Pressures, the Navy 

Did Not Follow Its 

Policy before 

Deciding to 

Decommission Nine 

Ships
Page 8 GAO-14-412 Navy Surface Ships

process required in the Navy’s decommissioning policy. Specifically, the 

Office of the Chief of Naval Operations, Warfare Integration directorate, 

which is responsible for the Navy’s decommissioning policy, did not 

prepare, and the Chief of Naval Operations, Integration of Capabilities 

and Resources directorate did not approve, a decision memorandum to 

support the Navy’s decision to decommission the nine ships. Navy 

officials from the Office of the Chief of Naval Operations, Warfare 

Integration directorate acknowledge that they did not follow the 

decommissioning policy. However, according to Navy officials, they did 

discuss budget and cost issues, including maintenance and 

modernization costs. According to Navy officials, they did not prepare the 

decision memorandum for two reasons: (1) because they wrote the 

policy, they did not believe that they were required to follow all elements 

in the policy, and (2) they were under time pressures, which required that 

they identify significant budget savings over a relatively short period. Our 

review of the Navy’s policy found that the policy does not list time 

constraints or any other situation that would allow officials to avoid the 

policy’s requirements. Navy documentation shows that officials normally 

have approximately 18 months to develop a Program Objective 

Memorandum (POM) and submit a proposed budget, which provides a 

detailed description of the Navy’s proposed programs projected 6 years 

into the future. However, they noted that they had about 6 months to 

resubmit their proposed fiscal year 2013 base budget and incorporate 

reductions of the alternate POM 2013, as directed by the Office of the 

Secretary of Defense, as shown in figure 3.
Page 9 GAO-14-412 Navy Surface Ships

Figure 3: Time Frames for Developing the Alternate Program Objective 

Memorandum (POM) 2013

Without the required decision memorandum to explain the early 

decommissioning of the nine ships, the Navy did not employ a 

transparent process, and it is unclear why the early decommissioning of 

these nine ships, including some with nearly half of their expected service 

life remaining, was in the best interest of the Navy. Furthermore, the 

identification of potential capability gaps and any associated mitigation 

plans remain undocumented. Officials from the Office of the Secretary of 

Defense and the Navy stated that the decommissioning of the nine ships 

would not have caused capability gaps (having the right types of forces) 

because the Navy would still have maintained active cruisers and docklanding ships in the battle force. According to Navy officials, the only 

reason it was in the best interest of the Navy to retire these ships prior to 

the end of their expected service lives was to achieve cost savings over 

the next 5 years. Specifically, the Navy could avoid costly midlife 

modernizations costs on these relatively new ships and this decision 

would, in turn, make room in its reduced budget for other priorities, such 

as buying new ships.
Page 10 GAO-14-412 Navy Surface Ships

The Navy’s policy does not incorporate key federal standards for internal 

control that can help agencies to achieve their goals,13 and as a result, 

the Navy was unable to gain the support of Congress for its February 

2012 decision to decommission nine ships. According to federal 

standards for internal control,14 agencies should communicate with and 

obtain information from external stakeholders (e.g., Congress), compare 

actual performance to planned or expected results, review performance 

measures and indicators, and compare and assess different sets of data 

to establish relationships and then take appropriate action. The Navy’s 

decommissioning policy does not address the needs of external 

stakeholders in the Congress who can affect the Navy’s ability to achieve 

its goals. Furthermore, the Navy did not evaluate the reasons why its 

original decommissioning decision was rejected by Congress before 

putting forth a similar proposal in 2013, nor did it evaluate all relevant 

performance indicators, such as the risk of decommissioning a ship with 

ballistic missile defense capabilities, before making its decision.

The Navy’s decommissioning policy identifies the need for internal 

stakeholders (e.g., Chief of Naval Operations) to develop, review, and 

approve the Navy’s decommissioning decision memorandum, but it does 

not take into account the need to engage external stakeholders such as 

Congress, whose support is necessary for the Navy to implement its 

decommissioning decisions. Federal standards for internal control require 

that agencies communicate with, and obtain information from, external 

stakeholders who can have a significant effect on their abilities to achieve 

their goals. The Navy’s policy states that it is the Secretary of the Navy 

who ultimately decides to decommission ships from the Navy’s fleet. 

However, in practice, the Secretary of the Navy does not have final 

decommissioning authority because the Navy’s request for 

decommissioning is subject to congressional oversight and funding. The 

funding is required for activities such as relocating the ship and removing 

equipment from the ship. According to Navy officials, the Navy did not 

engage with Congress as it developed its initial decommissioning 

decision, and Congress later requested that the Navy provide information 

to support its 2012 early decommissioning decision. However, Congress 

chose not to fund the decommissioning of these ships. In 2013, the Navy 

 13GAO/AIMD-00-21.3.1. 

14GAO/AIMD-00-21.3.1. 

The Navy’s Early 

Decommissioning 

Policy Does Not 

Incorporate Key 

Aspects of Federal 

Standards for

Internal Control

The Navy’s Policy Does 

Not Require Engagement 

with External Stakeholders
Page 11 GAO-14-412 Navy Surface Ships

continued to indicate that it intended to decommission the nine ships and 

again Congress prohibited the Navy from doing so. Without a policy that 

requires federal standards for internal control to engage external 

stakeholders, the Navy may continue to develop early decommissioning 

decisions that do not receive the congressional funding necessary for 

implementation.

The Navy’s decommissioning policy does not require the consideration of 

performance measures and indicators, including differences between 

actual performance and planned or expected results, and then use the 

results of these evaluations to adjust future plans. Federal standards for 

internal control require that managers compare actual performance to 

planned or expected results and analyze significant differences. They 

also call for comparisons and assessments of performance measures and 

indicators that can establish relationships and lead agencies to take 

appropriate action. Here, the decision maker did not document the basis 

for his decision and thus we cannot determine whether appropriate 

performance measures and indicators were considered. After Congress 

did not support the Navy’s 2012 decommissioning decision, Navy officials 

did not evaluate the reasons why Congress did not support it and 

continued to stand by the decision despite congressional disapproval. 

Had Navy officials evaluated the reasons why Congress prohibited the 

Navy for decommissioning the ships, they would have identified the 

needs of their external stakeholders and been able to better justify their 

decisions and adjust their future decisions appropriately. Navy officials 

stated that Congress has repeatedly requested information about 

performance measures and indicators such as readiness, cost, 

maintenance data, combatant commander requirements, naval fleet size, 

and associated risks.

The Navy collects information on all of these performance measures and 

indicators, but did not compare and assess all of this information when 

making its decision to decommission the nine ships. The Navy’s 

decommissioning policy does not specifically require that the Navy 

evaluate many of the performance measures and indicators Congress 

has expressed interest in. However, federal standards for internal control 

call for the review of performance measures and indicators and note that 

comparisons and assessments of different sets of data can establish 

relationships and lead agencies to take appropriate action. For example, 

the Navy collects a wide variety of information associated with the 

capabilities and condition of its cruisers, including combatant commander 

demands for ballistic missile defense capabilities, but did not evaluate all 

The Navy’s 

Decommissioning Policy 

Does Not Require the 

Consideration of 

Performance Measures 

and Indicators to Inform 

Future Decisions
Page 12 GAO-14-412 Navy Surface Ships

of this information before deciding to decommission the USS Port Royal.

Although the need to provide protection against ballistic missiles is one of 

the Department of Defense’s (DOD) highest priorities, the Navy did not 

analyze alternatives to minimize ballistic missile defense risks prior to 

submitting its plan to decommission the Port Royal. According to Navy 

officials, the geographic combatant commanders’ aggregate demand for 

ships with ballistic missile defense capabilities currently exceeds supply. 

However, the Navy’s decommissioning plan called for the 

decommissioning of the Port Royal, one of five cruisers with ballistic 

missile defense capabilities, and also the newest ship in the class. In an 

April 2014 report about the Port Royal, we found that this cruiser had 

some significant advantages compared to other cruisers that had not 

been scheduled for early decommissioning.15 Decommissioning a cruiser 

without ballistic missile defense capabilities rather than the Port Royal

would have maintained additional ballistic missile defense capabilities in 

the Navy at a time when the Director of the Missile Defense Agency 

testified that the combatant commanders continue to increase their 

demand for missile defense capability. DOD concurred with the 

recommendation in our April 2014 report that the Navy reevaluate its 

decision to decommission the Port Royal, and the Navy has decided to 

retain the Port Royal.

16 Without a policy that requires officials to review all 

relevant performance measures and indicators, the Navy may not 

consider all key information before making future decommissioning 

decisions. Although the Navy no longer plans to decommission ships, the 

Navy has now decided to place its 11 newest cruisers, including the Port 

Royal and three other cruisers with missile defense capabilities, in longterm phased modernization.17

Risk is a key indicator to consider when making a decommissioning 

decision; however, the Navy’s policy only requires officials to partially 

address this indicator. As previously noted, the Navy’s early 

 15GAO, Military Capabilities: Navy Should Reevaluate Its Plan to Decommission the USS 

Port Royal, GAO-14-336 (Washington, D.C.: Apr. 8, 2014).

16GAO-14-336.

17According to the Navy, its 11 newest cruisers (CG 63 though CG 73) will be removed 

from active service in 2015 and, after undergoing modernization, their service lives will be 

extended by 5 years, and they will be reactivated on a one-for-one basis as the Navy’s 11 

oldest cruisers (CG 52 through CG 62) reach the end of their expected service lives. 

Three dock-landing ships will also undergo a phased modernization program, beginning in 

2016, but only one dock-landing ship will be removed from active service at a time. 
Page 13 GAO-14-412 Navy Surface Ships

decommissioning decision memorandum requires that, among other 

things, officials address any capability gaps that result from early 

decommissioning decisions. The policy does not specifically require that 

officials address any capacity gaps. According to Navy officials, risk can 

be caused by gaps in either “capability” (having the right types of forces, 

equipment, and personnel) or “capacity” (having the right quantity of 

forces, equipment, and personnel). Navy officials told us that the early 

decommissioning of the seven cruisers and two dock-landing ships would 

not cause any capability gaps. However, shortfalls in the number of 

ships—capacity gaps—can be present even when there are no capability 

gaps.

The Navy recommended decommissioning large surface combatants and 

amphibious ships when it was reporting shortfalls in those same ship 

types to support its shipbuilding plans. In a January 2013 report to 

Congress, the Navy noted that it required a total of 88 large surface 

combatants and 33 amphibious ships within a total battle force of 306 

ships.18 According to the document, these 306 ships are needed “for the 

force to possess the requisite capability and capacity to deliver credible 

deterrence, sea control, and power projection to deter or contain conflict 

and, if called upon to win our nation’s wars.” According to the Navy’s 30-

Year Shipbuilding Plan for Fiscal Year 2014,19

 18Department of the Navy, Navy Combatant Vessel Force Structure Requirement

(Washington, D.C.: January 2013). 

its fiscal year 2014 force 

structure of 85 large surface combatants and 31 amphibious ships 

currently falls short of the capacity required to execute these important 

missions. Had the Navy addressed capacity risks, it would have 

determined that the early decommissioning of seven cruisers would have 

increased both short-term and long-term risks. According to the 30-Year 

Shipbuilding Plan, the early decommissioning of seven cruisers would 

have increased short-term risks as it reduced the Navy’s inventory of 

large surface combatants to 78 in fiscal year 2015. However, we found 

that the Navy’s decision to decommission seven cruisers before the end 

of their expected service lives would also have increased long-term risks. 

Because the Navy’s older cruisers had already completed their costly 

midlife upgrades and the Navy still needed to fund the upgrades for its 

19Department of the Navy, Report to Congress on the Annual Long-Range Plan for 

Construction of New Vessels for FY2014 (Washington, D.C.: May 2013). This report is 

also commonly referred to as the 30-Year Shipbuilding Plan for Fiscal Year 2014.
Page 14 GAO-14-412 Navy Surface Ships

newer cruisers, the Navy sought to achieve greater budget savings by 

decommissioning its newer cruisers. However, we found that the Navy’s 

decision to decommission its newer cruisers would have increased longterm risk because it would have caused the size of the Navy’s cruiser 

fleet to diminish more rapidly than would have been the case if the 

decommissioning decision had included the Navy’s older cruisers. Figure 

4 shows that under the Navy’s 2012 decommissioning proposal only nine 

cruisers would have remained in the fleet by 2024.

Figure 4: Total Number of Navy Cruisers by Year Based on Navy’s 2012 Decommissioning Proposal
Page 15 GAO-14-412 Navy Surface Ships

If the Navy’s oldest seven cruisers had been selected for 

decommissioning instead, the Navy would have incurred modernization 

costs but would have had 15 cruisers in the fleet through February 2024, 

because none of the newer cruisers would have been decommissioned 

prior to that date. Until the Navy made its decision to decommission the 

seven cruisers early, CG 63, CG 64, CG 65, and CG 66 had expected 

service lives that ran through 2026; CG 68 and CG 69 had expected 

service lives through 2027; and CG 73 through 2029. Without specific 

policy direction to require engagement with external stakeholders and 

consideration of key performance measures, the Navy may be missing 

opportunities to successfully justify future decisions to decommission 

ships and may be unable to gain support for future decommissioning 

decisions.

Facing the need to identify billions of dollars in short-term savings, Navy 

officials decided to decommission seven cruisers and two dock-landing 

ships early. However, we found problems in the Navy’s decision-making 

process, which likely contributed to the lack of congressional support for 

the Navy’s decommissioning decisions. These problems, which involve a 

lack of underlying support to justify the Navy’s decisions, offer important 

lessons for the future. First, Navy officials did not follow their own policy to 

develop and approve a decision memorandum that would have required 

the Navy to document, among other things, why the early 

decommissioning of nine ships was in the best interest of the Navy. 

Second, even if the Navy had completed a decision memorandum, the 

Navy’s policy does not incorporate key elements of federal standards for 

internal control, such as engaging with external stakeholders, comparing 

actual performance to planned or expected results, reviewing 

performance measures and indicators, and comparing and assessing 

different sets of data to establish relationships and take appropriate 

action. Revising the policy to incorporate federal standards for internal 

control may help the Navy justify its future decisions to congressional 

stakeholders who provide the authorization and funding necessary for the 

Navy to implement its force structure decisions.

We recommend that the Secretary of Defense direct the Secretary of the 

Navy to take the following two actions.

To improve the quality of the Navy’s future decommissioning decisions, 

direct the Chief of Naval Operations to document the Navy’s early 

decommissioning in decision memorandums in accordance with the 

Conclusions

Recommendations for 

Executive Action
Page 16 GAO-14-412 Navy Surface Ships

General Policy for the Inactivation, Retirement, and Disposition of U.S. 

Naval Vessels prior to approving any future recommendations for early 

decommissioning of Navy ships.

To enhance the likelihood that those decisions will be implemented, direct 

the Chief of Naval Operations to update the Navy’s General Policy for the 

Inactivation, Retirement, and Disposition of U.S. Naval Vessels to 

incorporate key elements of federal standards for internal control, such as 

communicating with and obtaining information from external stakeholders, 

comparing actual performance to planned or expected results, evaluating 

performance measures and indicators, such as risk, and comparing and 

assessing different sets of data to establish relationships and take 

appropriate action. In updating the policy, the Chief of Naval Operations 

should also consider requiring that its early decommissioning decision 

memorandums specifically address capacity as well as capability gaps.

We provided a draft of this report to DOD for comment. In its written 

comments, which are reprinted in appendix II, DOD partially concurred 

with our two recommendations.

DOD partially concurred with our first recommendation that the Navy 

should complete a decision memorandum in accordance with the General 

Policy for the Inactivation, Retirement, and Disposition of U.S. Naval 

Vessels for any future decommissioning decisions. DOD stated that the 

Navy should have followed the policy that requires the decision 

memorandum, but did not do so because of “compressed timelines,” and 

would ensure the completion of decision memorandums for any future 

early decommissioning recommendations. In light of the Navy’s large 

capital investment in its surface fleet, we continue to believe that any time 

the Navy recommends the early decommissioning of its ships it should 

follow its policy for completing decision memorandums—regardless of 

any time or workload challenges. In addition, our review of the Navy’s 

policy requiring decision memorandums found no exception for time 

constraints. The Navy had about 6 months between when it made its 

decision to decommission 9 ships early and when it developed a revised 

fiscal year 2013 base budget that incorporated reductions that were 

directed by OSD. We believe that 6 months is adequate time to meet the 

requirement to prepare a decision memorandum. 

DOD partially concurred with our second recommendation that the 

Secretary of Defense direct the Secretary of the Navy to incorporate key 

elements of federal standards for internal control into its policies to 

Agency Comments 

and Our Evaluation
Page 17 GAO-14-412 Navy Surface Ships

enhance the likelihood that Navy decisions will be implemented. The 

department agreed that engaging external stakeholders, including 

Congress, is important. The Navy stated that until the Secretary of 

Defense and the President have approved the budget request, all actions 

are predecisional and internal, and therefore are not discussed with 

Congress. We recognize that the Navy’s decision to decommission nine 

ships early was driven by budget concerns and therefore was closely 

aligned with the budget process; however, we believe that it is important 

for the Navy to continuously engage Congress on key matters related to 

the Navy’s maritime strategy and core capabilities. This continual 

engagement with Congress regarding the Navy’s capacity due to the 

early decommissioning of ships does not need to be linked only to budget 

discussions, and could address ongoing issues regarding core Navy 

capabilities such as power projection and its associated need for properly 

sized forces. Thus, discussions of major decisions such as the early 

decommissioning of ships should be ongoing as the Navy continues to 

refine its strategy and missions. As discussed in our report, the Navy 

chose not to engage with Congress as it developed its early 

decommissioning decision, on more than one occasion Congress asked 

the Navy to provide information to support its early decommissioning 

decision and in both 2013 and 2014 decided not to fund the early 

decommissioning of these ships. If the Navy does not periodically engage 

external stakeholders on capacity and capability issues prior to providing 

Congress with plans for the early decommissioning of ships, the Navy 

may continue to be unable to gain congressional approval and funding for 

its plans. Moreover, while the Navy’s comments primarily focused on 

engaging with external stakeholders, our recommendation also noted the 

importance of incorporating other elements of internal controls into its 

policy, such as comparing actual performance to planned or expected 

results, evaluating performance measures and indicators, and comparing 

and assessing different sets of data to establish relationships and to take 

appropriate action. We continue to believe that the Navy should update its 

policy to reflect these critical internal controls.

DOD disagreed with a portion of our second recommendation to require 

future decision memorandums to address capacity as well as capability 

gaps. DOD stated that including a capacity discussion would provide 

minimal benefit since any retirement without replacement will, by 

definition, increase risk and reduce capacity. However, we continue to 

believe that a discussion of capability gaps that ignores capacity issues is 

incomplete, and believe there are benefits from specifically addressing 

capacity in early decommissioning decision memorandums. With the 

Navy’s current force structure short of required capacity, it is critical to 

fully understand the nature and duration of additional risks caused by 
Page 18 GAO-14-412 Navy Surface Ships

early decommissioning plans and alternatives. As our report notes, the 

Navy’s decision to decommission newer cruisers would have caused 

greater long-term capacity gaps and risks than alternative options 

because it would have caused the size of the Navy’s cruiser fleet to 

diminish more rapidly than a possible alternative that would have 

decommissioned the Navy’s older cruisers. 

We are sending copies of this report to congressional defense 

committees and the Secretary of Defense. In addition, the report is 

available at no charge on the GAO website at http://www.gao.gov.

If you or your staff has any questions about this report, please contact me 

at (404) 679-1816 or pendletonj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. Key contributors to this report are listed in appendix 

III.

John H. Pendleton

Director

Defense Capabilities and Management
Page 19 GAO-14-412 Navy Surface Ships

List of Committees

The Honorable Carl Levin

Chairman

The Honorable James Inhofe

Ranking Member

Committee on Armed Services

United States Senate

The Honorable Richard Durbin

Chairman

The Honorable Thad Cochran

Ranking Member

Subcommittee on Defense

Committee on Appropriations

United States Senate

The Honorable Howard P. McKeon

Chairman

The Honorable Adam Smith

Ranking Member

Committee on Armed Services

House of Representatives

The Honorable Rodney Frelinghuysen

Chairman

The Honorable Pete Visclosky

Ranking Member

Subcommittee on Defense

Committee on Appropriations

House of Representatives
Appendix I: Scope and Methodology

Page 20 GAO-14-412 Navy Surface Ships

To evaluate the extent to which the Navy followed its policy when it 

decided to decommission nine ships before the end of their service lives, 

we reviewed relevant Navy policies and procedures on Navy 

decommissioning—including the policy entitled General Policy for the 

Inactivation, Retirement, and Disposition of U.S. Naval Vessels—to 

identify Navy requirements for the administration of inactive Navy vessels. 

We obtained and analyzed information from the Office of the Chief of 

Naval Operations and sought to corroborate any testimonial evidence and 

conducted interviews to discuss any conflicting evidence. For example, 

we reviewed e-mails, internal briefing slides, and summary papers that 

Navy officials provided to us, as well as Ship Inactivation Decision 

conference minutes that were held before and after the decommissioning 

decisions were made. We obtained and analyzed the Navy’s Report to 

Congress on the Annual Long-Range Plan for Construction of Naval 

Vessels, known as the 30-year shipbuilding plan, for fiscal years 2012, 

2013, and 2014. To understand how the Navy’s proposal and laws related 

to that proposal had changed over time, we analyzed Navy budget 

information included in the President’s fiscal year 2013 and 2014 budget 

submissions and the relevant portions of the fiscal years 2013 and 2014 

defense appropriations and authorization acts. We interviewed Navy 

officials from Naval Sea Systems Command, the Board of Inspection and 

Survey, the United States Fleet Forces Command, and United States 

Pacific Fleet to validate our analysis. Also, we interviewed Navy 

headquarters and fleet officials.

To evaluate the extent to which the Navy’s policy incorporates federal 

standards for internal control, we analyzed the Navy’s decommissioning 

guidance and standards for internal control in the federal government. We 

then compared the federal standards for internal control criteria to the 

Navy’s decommissioning policy. We spoke with officials from the Office of 

the Chief of Naval Operations; Commander Naval Surface Force, U.S. 

Pacific Fleet; Commander Naval Surface Force, U.S. Atlantic Fleet; Naval 

Sea Systems Command; and the Navy Board of Inspection and Survey, 

whose offices were part of the Navy’s Program Objective Memorandum 

(POM) 14 Ship Inactivation Decision Conference in December 2011. We 

discussed with Navy officials the information and data requested from and 

provided by their respective offices prior to the Navy’s decision to 

decommission nine ships, as well as any challenges or risks that may 

occur due to the decommissioning of these ships. Additionally, we 

obtained written responses to our questions from the previously 

referenced officials and from officials of the Office of Warfare Integration 

(N9I), which is part of the Office of the Chief of Naval Operations; the N9I 

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 21 GAO-14-412 Navy Surface Ships

office’s officials administer the Ship Inactivation Decision Conferences 

and are responsible for the Navy’s decommissioning policy.

For each of the objectives, we interviewed officials from the Office of the 

Secretary of Defense, Cost Assessment and Program Evaluation; and the 

Office of the Chief of Naval Operations, Integration of Capabilities and 

Resources, Surface Warfare, Expeditionary Warfare, and Warfare 

Integration; and Naval Sea Systems Command. Because of the focus of 

this report, we interviewed officials from the Office of the Chief of Naval 

Operations, which is responsible for overseeing the operating forces of 

the Navy. Specifically, we interviewed officials from offices under the 

Office of the Chief of Naval Operations, which are organized by “N” and 

associated numbers, including N8 (Integration of Capabilities and 

Resources), which is responsible for optimizing Navy investments and 

budget and resource programming, and N9 (Warfare Systems), which is 

responsible for the integration of manpower, training, sustainment, 

modernization, and procurement of the Navy’s warfare systems. Within 

N9, N95 maintains oversight of the Navy’s amphibious ships, and N96 

oversees surface combatants. N9I oversees, and is responsible for,

policies regarding the Navy’s long-range plans for shipbuilding, as well as 

decommissioning, inactivation, and disposition of Navy ships.1

 1

According to Navy policy, decommissioning is the process of removal of a commissioned 

U.S. Navy ship from active status. Decommissioning normally occurs at the retirement of a 

U.S. Navy ship but could coincide with the transfer of the ship to another agency, such as 

the Military Sealift Command. Inactivation is the process by which a ship is prepared for 

decommissioning and eventual disposition. According to the Navy policy, some ships that 

are decommissioned may be retained in the inactive ship inventory for a period for future 

mobilization or while awaiting disposal. The Navy’s methods to reduce the inactive ship 

inventory, or dispose of ships, include interagency transfers to the Maritime 

Administration, U.S. Coast Guard, or other U.S. federal agencies; donations for memorial 

or museum use as static public displays; foreign military sales transfers and leases; 

dismantling and recycling (also known as scrapping); fleet training exercises; experimental 

use, including weapons effectiveness testing; or transfers to U.S. states and territories for 

use as artificial reefs. 

Figure 5 

shows the administrative chain of command within the Office of the Chief 

of Naval Operations.
Appendix I: Scope and Methodology

Page 22 GAO-14-412 Navy Surface Ships

Figure 5: Partial Organization of the Office of the Chief of Naval Operations

Finally, in reviewing the Navy’s process and practices, we analyzed how 

the Navy made its decommissioning decision and compared its process 

and practices to standards for internal control in the federal government. 

The Navy’s decision to take the 14 ships out of their normal deployment 

rotations and place them in long-term phased modernization to preserve 

the lives of the ships was outside the scope of this review and we did not 

evaluate the documentation that may have been prepared to support that 

decision. Further, we reviewed prior GAO work on Navy surface ship 

readiness as well as Navy testimony on Navy readiness and the 

decommissioning of its ships, and Department of Defense (DOD) 

strategic guidance on the key military missions the department will 

prepare for, and reviewed DOD’s budget priorities for fiscal years 2013 

through 2017.

We conducted this performance audit from May 2013 through June 2014 

in accordance with generally accepted government auditing standards. 

Those standards require that we plan and perform the audit to obtain 

sufficient, appropriate evidence to provide a reasonable basis for our 

findings and conclusions based on our audit objectives. We believe that 

the evidence obtained provides a reasonable basis for our findings and 

conclusions based on our audit objectives.
Appendix II: Comments from the

Department of Defense

Page 23 GAO-14-412 Navy Surface Ships

Appendix II: Comments from the

Department of Defense
Appendix II: Comments from the

Department of Defense

Page 24 GAO-14-412 Navy Surface Ships
Appendix II: Comments from the

Department of Defense

Page 25 GAO-14-412 Navy Surface Ships
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 26 GAO-14-412 Navy Surface Ships

John H. Pendleton, (404) 679-1816 or pendletonj@gao.gov

In addition to the contact named above, key contributors to this report 

were Michael Ferren (Assistant Director), Richard Burkard, Sharon 

Pickup, Richard Powelson, Jillena Roberts, Michael Silver, Amie Steele, 

and Nicole Volchko.

Appendix III: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments

(351827)
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